(Alliance News) - The UK Financial Conduct Authority on Tuesday said it wrote to investment platforms and self-invested personal pensions operators, setting out concerns on the treatment of retained interest on customers' cash balances.

The UK financial watchdog noted that the amount of interest earned by some firms has increased in line with rising interest rates, after surveying 42 firms.

It found that the majority of those surveyed retain some of the interest earned on these cash balances, which "may not reasonably reflect the cost to firms of managing the cash".

Many also charge a fee to customers for the cash they hold, known as "double dipping", the FCA said.

The FCA said it was concerned that these practices may not be providing fair value to customers and "may not be understood by consumers or properly disclosed".

It said it was concerned by "double dipping" and has instructed firms to cease this.

"Rising rates mean greater returns on cash. Investment platforms and SIPP operators need now to ensure how much of the interest they retain and, for those who are double dipping, how much they're charging customers holding cash, results in fair value," said FCA Executive Director of Consumers & Competition Sheldon Mills.

"If they cannot make that case, they need to make changes. If they don't, we'll intervene."

The FCA said firms will need to make any changes by February 29.

Last month, the Bank of England maintained interest rates at a 15-year high of 5.25%, a second-consecutive hold following one in September and ending a streak of 14 successive hikes since December 2021. The BoE had rapidly shot up the bank rate from a Covid-19-induced low of 0.10%.

By Greg Rosenvinge, Alliance News senior reporter

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